Former Rail Regulator Hits Out at 'Illegal' Levy
May 20, 2008, The Daily Telegraph

As reported by The Daily Telegraph, Tom Winsor, a partner in the Energy, Infrastructure and Project Finance Practice at White & Case in London, has accused the UK Department for Transport of acting illegally by imposing "a new franchise tax."

In an industry briefing note, Winsor, who was the UK Rail Regulator between 1999 and 2004, criticised the Government's new railway franchise policy.  The DfT has announced that it will henceforth charge the greater of £1 million or 5 percent of the value of the change of control to the vendor, whenever it is asked to give its consent to a change of control.  This will be in addition to an administration fee. 

The briefing note argued that, "Neither payment is provided for in the Railways Act 1993 or the standard franchise agreement…a public authority, such as the DfT, can only exercise its powers for the purposes for which those powers were conferred. Exercising power for a different - collateral - purpose is illegal."

"In doing this, the DfT sets a dangerous precedent for other public-private partnerships, where the government retains a change of control power.  Any company with significant contracts with the UK government in any field should be concerned about this purported power, which could reduce the value of the contract by up to 5 percent."

The DfT denies acting illegally, but Winsor remains firm in his opinion.  "Government does not have unfettered power," he said, "and it must always act within the limitations on its powers."

To read Tom Winsor's briefing paper in full, click here.